Hedge Fund Giant Louis Bacon's Bold Mission To Save The American West

In the main lodge of his Trinchera Blanca ranch in Colorado, Louis Bacon, the founder of the giant hedge fund firm Moore Capital Management, takes in his pristine and wild 172,000-acre tract from a plush leather chair. A ghost herd of animals–the heads of elk, mule deer, bison and bighorn sheep, a few of which he killed himself with a bow and arrow–silently watches over him from the surrounding walls.

The 54-year-old Bacon, who is compact, blue-eyed and handsome in the manner of an Eddie Bauer catalog model, is doing something he almost never does and generally despises: sitting down with a member of the media. Right away he begins shifting uneasily in his seat, unable, it seems, to get comfortable. He parries away the first few questions, answering in short declarative bursts. “How did Annie get me into this?” he wonders aloud, referring to Ann Colley, the head of his charity, the Moore Charitable Foundation, and the person who had pushed him to do this rare interview.

After a half-hour of squirming, though, the tension suddenly disappears from his face. He becomes expansive and energetic. He shifts in his chair now only to make emphatic points. The reason for the transformation: Bacon is talking about what he calls his “righteous battle” to save Trinchera from what he saw as environmental degradation, a role that, ironically, made him shed some of his precious privacy and embrace his heretofore anonymous role as one of the nation’s leading conservationists.

**

When Bacon purchased Trinchera from the Forbes family (yes, this Forbes family) in 2007 he figured he’d found his crown jewel. For nearly two decades the professional asset manager had been assembling a portfolio of landscapes in New York, North Carolina and Colorado, quietly and painstakingly putting them into conservation easements, permanently saving them from further development. While his fellow billionaire land conservationists, John Malone and Ted Turner–the largest and second-largest individual landowners in the country, respectively–were making headline-grabbing purchases of literally millions of acres of land, Bacon was working, typically, under the radar, patching together smaller parcels. Trinchera, in the San Luis Valley, was his biggest purchase yet–and the $175 million price tag made it, at the time, the most expensive residential sale in the history of the U.S. But even it amounted to a low-key affair. Just the way Bacon likes it.

The ranch encompasses two conjoined properties–the 81,400-acre Trinchera portion (the large majority of which the Forbeses had put in an easement in 2004) and the 90,000-acre Blanca portion to the north. It is one of the true gems of the American West, with sagebrush and grass bottomlands that rise in elevation through alpine forests and culminate in the tundra found at the summits of the three 14,000-foot peaks (Blanca, Lindsey and Little Bear) that majestically lord over the Blanca property. Healthy herds of elk, mule deer and bighorn sheep roam freely through the corridors of the pristine land, which especially pleases Bacon, a hunting enthusiast who specializes in the high art of bow hunting. More than 40 miles of stream snake through the property, portions of which hold some of the last remaining populations of the imperiled Rio Grande subspecies of cutthroat trout.

“I was looking for a large landscape that had different ecosystems within it,” says Bacon, gazing out of the lodge’s massive window. “This was the pièce de résistance.”

But shortly after buying Trinchera Bacon realized he had a serious problem and that in order to fix it he would have to do the previously unfathomable: become a public figure. His paradise was under siege, threatened by an invasive, man-made species–a proposed energy transmission line, which was to be held aloft by a series of 150-foot-tall metal towers. Seventeen miles of that line was to cut through the heart of the Blanca portion of the ranch and right in front of the trio of 14,000-foot peaks, the signature “viewshed” of the San Luis Valley. The project, a joint venture between Xcel Energy and Tri-State Generation & Transmission, was being sold to the public as a needed “green” line that would carry solar energy and was backed by a prominent environmental group in Boulder. It looked like a huge loss for Bacon.

But Bacon, who has spent the past 30 years in daily market battles with anonymous forces on the other side of any given trade, didn’t intend to go down without a fight. He assembled a team of transmission line experts, lawyers and public relations folks to dig in behind the scenes. “Initially I just wanted to see if this was a battle that made sense for us to fight,” he says. Pretty quickly it became apparent that “the line made no sense at all.”

Bacon discovered that the energy companies had cheaper alternatives for existing lines, that Xcel had already met its renewable energy mandate with the state and that the line, which hadn’t even gone through an environmental impact study, would in fact most likely not even carry any “green” energy at all. “The more we looked into it, the more we felt like Erin Brockovich,” says Bacon, referring to the environmental sleuth immortalized by Julia Roberts in a 2000 movie. To Bacon, greed was the sole driver behind the proposed line. “The only reason they wanted to build the line was to make more money,” he says. “It had nothing to do with public interest.” Bacon says the energy companies were guaranteed a double-digit rate of return on the project, with zero interest rates.

Feeling the heat, the energy companies fought back, painting Bacon as a Nimby (not in my backyard), a rich Easterner who wanted to dictate the energy needs of Colorado. (“Poor little rich boy,” the Pueblo Chieftain called him in an editorial.) Placed on the defensive, Bacon had a choice: quietly retreat or embrace the limelight. His answer came in the form of an op-ed for the Denver Post. Furthermore, he got out the story of his conservation background, of the tens of millions he’d donated to environmental groups and of his nearly two decades’ worth of work putting land into conservation easements.

Bacon’s pressure worked, and he gradually won over public sentiment. After a nearly three-year battle Xcel announced last fall that it was pulling out of the project. Tri-State, though it has not officially given up, has said it is exploring alternatives on existing lines, the very ones that Bacon and his team had proposed. (A spokesman for Xcel wouldn’t comment on Bacon’s charges but said the company pulled out because it found it actually had no need for additional energy; Tri-State could not be reached for comment.)

And earlier this year Bacon issued his coup de grâce. In a press conference with Secretary of the Interior Ken Salazar, he announced that he was putting the 90,000 acres of the Blanca portion of his ranch into a conservation easement donated to the U.S. Fish & Wildlife Service. Combined with the approximately 75,000 acres on the Trinchera portion already preserved, Bacon was creating the largest single conservation easement in the state of Colorado.

The battle, for all intents and purposes, was over. The easement would make the construction of a new transmission line extremely difficult to achieve. That the easement would be in the hands of the U.S. Fish & Wildlife Service, a federal government entity, would raise that bar even higher: Any new construction on the land would require an unprecedented “eminent domain” ruling.

“I had the means to fight it, so I did. It turned out to be sort of fun to uncover the corporate misdealing. But it was expensive fun,” he says. In all he spent well more than $10 million fighting the line.

Oh, and on those charges of being a Nimby? Bacon doesn’t deny it. “What’s wrong with Nimbyism?” he asks. “The entire environmental movement was built on it. Some of the greatest environmentalists were Nimbys. Thoreau protected Walden, right?”

**

Once upon a time the federal government played the biggest role in conserving America’s wild lands. Yellowstone National Park came into existence in 1872, signed into law by President Ulysses S. Grant. In 1906 President Theodore Roosevelt officially created Yosemite National Park. In more recent times, however, the federal government has lacked both the resources and the mandate to ensure that large tracts of land remain pristine. That burden has shifted, in part, to the nation’s billionaires.

The land trust movement, from which conservation easements sprang, has been around for more than a century. But in the last two decades easements have gained momentum. The heart of it remains small communities that are looking to protect open lands and farms from further development. But billionaires have gradually begun to take on a bigger role. Men like Malone, Turner and Bacon have the means to save properties as large as state and even national parks in one fell swoop. And though easements created by private individuals are generally not open to the public, they do serve the conservation purpose of keeping the land pristine and open and undisturbed for watersheds and critical flora and fauna.

These billionaires operate on a wide spectrum when it comes to land conservation. Conservation easements, unlike national parks, do generally allow for some economic activity to happen, usually preexisting uses like agriculture and sustainable timber cutting. On one end of the spectrum is Turner, 73, who owns 2.1 million acres of land in the U.S. On much of his property, most notably on his Flying D Ranch in Montana, Turner has striven to return the land to its pre-Columbian state, ripping out fences, allowing bison (the original ruminant species) to graze the grasslands instead of cattle and even going so far as to poison streams to rid them of nonnative fish.

Malone, the 71-year-old chairman of Liberty Media, represents the other end of the spectrum. Much of his 2.2 million acres is still “working land”–and, in particular, his 1 million acres in Maine and New Hampshire, on which he maintains a robust sustainable timber operation. “I tend to be more willing to admit that human beings aren’t going away,” Malone told FORBES last year.

Bacon falls somewhere in between. Like Malone, he has a selective timber operation on Trinchera in which he weeds out dead or dying trees to help prevent massive forest fires (though Bacon’s is noncommercial); he runs programs for fishing and hunting (for the latter, guests pay up to $10,000 a week to chase elk and deer); he has a bit of agriculture, growing alfalfa and barley on some of the ranch’s valley floor.

But for the most part Bacon tilts toward Turner. The two have been friends for more than a decade, hunting together every few years. Bacon calls Turner the “blue-ribbon standard” for individual conservationists, and says he frequently consults him on environmental matters. “We’ve talked about how important it is for private landowners to take a proactive role in conservation,” Turner tells FORBES. “Louis is deeply dedicated to the environment.”

Like Turner, Bacon has put an emphasis on saving native species. He has constructed fish barriers in streams to protect the Rio Grande cutthroat trout from nonnatives. He has embarked on an ambitious plan to regrow stands of the imperiled Aspen tree, protecting them from elk with fortresslike structures made from forest slash. He has taken down hundreds of miles of fence to open up the land. And he’s managing the entire property for fish and game. “Wildlife would prefer things in their original state, I think,” says Bacon. He admits that one of the reasons he favors this approach is that it enhances the hunting. He, like many, is of the opinion that sportsmen are often the best stewards of the game they hunt, a belief that may seem contradictory to the PETA crowd.

Malone and Turner have more or less kept the government off of their properties. But this is where Bacon, with his relationship with the federal government, veers from them both. The entire 165,000-acre Trinchera easement is to be the foundation of the planned Sangre de Cristo Conservation Area, a mosaic of public and private properties protecting a huge swath of the southern Rockies. It was an idea hatched by Interior Secretary Salazar, a fifth-generation resident of the San Luis Valley. “What Louis Bacon has done with this donation is very important,” says Salazar, who has worked on these types of partnerships as part of President Obama’s America’s Great Outdoors initiative, which aims to partner the government and private landowners in conservation. Says Bacon: “I think the government is happy to have part of the burden shifted to the private landowner and yet still be involved in terms of setting guidelines for land management practices.”

The donation, though, has put Bacon in the odd position of partnering with an Administration that he does not back (he has raised funds for Republican nominee Mitt Romney). In effect, he has donated the largest piece of land to Obama’s conservation initiative. Says Bacon, “I like working with Salazar, who I take to be a centrist Democrat. And anyway, I see this as an American campaign, not a left or right one.”

**

Bacon’s conservation ethic has its roots in his childhood. He frequently hunted and fished while growing up in Raleigh, N.C. “What I remember most as a child is being outdoors with my father and brothers,” he says. “Those were my formative experiences, and I’ve tried to create that for my family now.” (Indeed, in August he hiked on Trinchera with a few of his sons; Bacon has four children from his first marriage and three children from his current one.) In college Bacon was known as somewhat of a loner who eschewed fraternity parties to hunt deer and study the giants of American literature. Hunting, he says, is similar to finance: They both require patience and the ability not to panic.

The outdoors and the markets came together for Bacon through one of his first jobs, as a captain on a fishing boat owned by a man named Walter Frank, a stock specialist on the New York Stock Exchange. Through Frank, and after graduating from Columbia Business School, Bacon went to Wall Street, where he worked closely with another southerner, Paul Tudor Jones, who helped him bring in clients after he started Moore Capital Management in 1989. In 1990 Bacon popped an 86% return for his investors, based on sage bets surrounding the first Gulf war and European currency. The fund has had an 18% average annual return since inception. Despite some recent setbacks (in August Bacon returned $2 billion to investors after more than a year of disappointing returns), his hedge fund remains one of the bigger players, with nearly $13 billion under management. More than two decades of generous fees on fat returns on that hefty asset base produced a fortune FORBES currently estimates at $1.3 billion, good for No. 347 this year on The Forbes 400. (For the record, he holds his own profession in roughly the same regard he does journalism, which he had considered out of college: “It’s unfortunate that so many kids these days want to go into a certain branch of finance, a business that’s of questionable contribution to society.”)

Along the way his environmentalism began to bloom. In 1993 Bacon bought Robins Island, a 434-acre, mostly undeveloped property in the middle of Great Peconic Bay off Long Island, for $11 million out of bankruptcy. Four years later he donated the land to the Nature Conservancy, the first of his ten easements. “Everyone around the island was worried that I’d put in a bunch of homesites. They all wanted a pristine Robins to look at,” he says. “Now I get to look back at all of their homesites.” Bacon laughs as he says this, but Robins was an instructive experience. “All of these properties are part of a community, and it’s really important to view them that way,” he says. To that end Bacon has strived to be a good neighbor. At Trinchera, as with nearly all of his properties, he has donated money to community organizations like local schools, police departments and libraries.

Bacon went on to buy another 900 acres on Long Island, a 1725 plantation in North Carolina once owned by several ancestors, the 21,000-acre Tercio Ranch in Colorado and, of course, Trinchera. He has spent close to $400 million on 202,000 acres of land in the U.S. that are either in easements or soon will be. (Bacon also owns a handful of international properties, including land in Scotland, Panama and the Bahamas.) He says his land ethic can be summed up in the famous Aldo Leopold quote: “A thing is right when it tends to preserve the integrity, stability and beauty of the biotic community. It is wrong when it tends otherwise.”

Conservation easements offer a neat way for wealthy environmentalists like Bacon to have their cake and eat it, too. Easements come with some serious breaks on taxes. The easements are valued by taking the present value of the land, as is, and contrasting that with an appraisal of the land if it were fully developed. The tax break is the difference of the two. It was reported that Bacon got an $8 million tax deduction on his $11 million purchase of Robins. He refuses to divulge what a potential deduction would be on Trinchera, which already has tax credits for its agricultural operation, but says it will be somewhere in the neighborhood of what he spent to save it from the transmission line. Easements also offer another benefit: They will allow him to pass along the land to his children without huge capital gains taxes, because the land, which will never be fully developed, is valued at a lower rate.

Until the transmission line battle, Bacon’s conservation efforts did not attract nationwide attention. Most of his environmental activism came in the form of donations. (Bacon has given $50 million in the last 12 years to such environmental and educational groups as Riverkeeper, the Natural Resources Defense Council, Friends of the Earth and the Sierra Club Foundation.) Effectively outed by the Blanca battle, Bacon has become more accepting of his public role. The National Audubon Society will be awarding him its prestigious Audubon Medal early next year. Yet even after warming up during the first of what would be three interviews with him, he occasionally gazed out of the lodge window, seeming like he’d much rather be up in the mountains, hunting, where he says he completely disconnects and “finds relief from the pressures of civilization.”

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Brian: Thanks for writing in. My guess is that he means “original state” as in “no condos and shopping malls and transmission towers.” I admit maybe I’m biased on this issue: I’m both a fisherman and a hunter. We humans have been chasing game and fish for a lot longer than we’ve been building strip malls.

Brian: Like I said, I’m biased, but I think that wildlife and land conservation go hand-in-hand. It seems contradictory, I realize, that those who seek to kill game are the best conservationists of game and their habitat. But I think it’s true. When you look at what Ducks Unlimited–a hunters’ group–has done for the nation’s wetlands, or what the Atlantic Salmon Federation and Trout Unlimited–two fishing groups–have done for rivers and estuaries, I think it becomes very clear that they are a net positive, for the species and the habitat. I went into greater depth on this subject in this post: http://www.forbes.com/sites/monteburke/2010/12/16/on-the-morality-of-killing-big-game/

As a passionate conservationist who believes in ecosystem management and the principles of sustainable use, I feel it necessary to support Monte’s position and congratulate him on taking a well informed and correct position.

In today’s world, at a time when wildlife are competing for resources with an ever-increasing global population of humans, the success and failure of some wildlife populations are reliant on human action. It is within this world that humans have learned to conserve wildlife, and with politics aside, that hunting is the most simplistic, practical, and cost-effective management tool for wildlife conservation.

As a hunter-conservationist, I understand the role that humans play in disrupting the harmony of the natural world, and the often dire consequences of wildlife overabundance.

In closing, I quote the West African environmentalist, Baba Dioum of Senegal, who said, “In the end we will conserve only what we love, we will love only what we understand, and we will understand only what we are taught.”

What the article fails to say is the millions and millions of tax write offs in the form of charitable deductions (conservation easements) that this guy received. He did this for several reasons and the tax deduction was one of the big reasons.

Chipper: Um, you mean like this paragraph, taken straight from the story?

“Conservation easements offer a neat way for wealthy environmentalists like Bacon to have their cake and eat it, too. Easements come with some serious breaks on taxes. The easements are valued by taking the present value of the land, as is, and contrasting that with an appraisal of the land if it were fully developed. The tax break is the difference of the two. It was reported that Bacon got an $8 million tax deduction on his $11 million purchase of Robins. He refuses to divulge what a potential deduction would be on Trinchera, which already has tax credits for its agricultural operation, but says it will be somewhere in the neighborhood of what he spent to save it from the transmission line. Easements also offer another benefit: They will allow him to pass along the land to his children without huge capital gains taxes, because the land, which will never be fully developed, is valued at a lower rate.”

Non-profits generate revenues, too. I’m a reporter; I check facts for a living. I presented Bacon’s side and the energy companies’ sides. The least expensive way to prevent blackouts in the valley actually seems to be to use an existing line.

Wow. Not for profit electric co-operatives are operated on a least cost basis. Any excess revenue is returned to the member owners.

The options proposed by Bacon’s team are less expensive but don’t actually solve the reliability problem. In the case of a forest fire in the mountains of Colorado, both of the two existing lines could be removed from service. Putting another line in the same corridor, as Bacon proposes, doesn’t help anything. The Valley could easily see a month long blackout while lines are rebuilt.